Full Report - Subregional Office for East and North-East Asia - escap

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2013
Box 2.4. (continued)
will increase during the next three decades. In Bangladesh the inflection point will be reached approximately in 2025 when
a little more than 70% of the population will be of working age; and it will remain at this level for 15 years before it begins
to decrease towards 2040. India and Pakistan will reach their inflection points approximately a decade later, in 2035. This
phenomenon goes against the general trend in the Asia-Pacific region where most countries are projected to experience a
decrease in the working-age population. The Russian Federation, for instance, reached its inflection point in 2009; and China
and Thailand are expected to reach theirs in 2013 and 2014 respectively. In all three cases the proportion of the working-age
population is expected to drop precipitously in the next decade (UNDESA, 2012b).
For Bangladesh, India and Pakistan to reap the demographic dividend, effective employment policies need to be developed to
ensure that the growth in the workforce transfers into productive employment. These policies need to be explicitly targeted at
youth. Specifically related to this issue is the problem of integrating those in vulnerable employment. In Bangladesh, India and
Pakistan more than 60% of the workforce occupy jobs in the informal sector. This not only results in a vicious circle of poverty,
but also represents the loss of a potential tax base that could be used to finance social protection and other pro-poverty measures.
Indeed, measures to enhance the productivity of workers and formalize the labour market are essential for ensuring that these
countries capitalize on their demographic dividend.
In addition, a young labour force implies innovative and entrepreneurial potential that could provide a competitive advantage
in the late-modern information age and knowledge economy. This composition can provide dividends in the form of a more
entrepreneurial business culture and by empowering young women. As fertility rates decrease women can break away from their
traditionally ascribed roles and join the labour force. Such an increase in female labour participation would also play itself out
in terms of human development and enhanced domestic demand.
In addition to effective employment policies, building human capital through investments in health and education is essential.
It has long been acknowledged that health and education are central determinants of human capital, that is, of the stock of
knowledge and skills that go into economic production. Good health makes people more productive while those that receive
higher formal education tend to earn more money than others. Health and education therefore add value to the economy and
increase a household’s income. These are necessary conditions for sustained economic development.
In addition to the potential increase arising from a larger number of workers, an increasing proportion of the working-age
population also provides an opportunity to reap a demographic dividend through an accelerated accumulation of capital as a
result of reduced spending on dependents. As the “boom” generation begins to enter the working-age group, the ratio of the
non-working-age population to the working-age population – that is, the “dependency ratio” – will begin to decrease. If the
increasing number of individuals of working age can be productively employed, a lower dependency ratio would mean that less
investment should be needed to meet the needs of the youngest and oldest populations; therefore, household income, savings
and economic growth will increase. Again, as with the share of the working-age population, in contrast with the general trend
in the Asia-Pacific region, the dependency ratios of Bangladesh, India and Pakistan are projected to fall during the next several
decades. For instance, in 2010 the dependency ratios of these three countries were 56%, 55% and 66% respectively. All exceeded
the average for Asia and the Pacific of 48%. However, the three countries’ dependency ratios are projected to fall to 41%, 46%
and 43% respectively by 2040, while the average in Asia and the Pacific is expected to increase to almost 52%.
In sum, with the right policy mix, the demographic dividend can be reaped, accruing from the rapid demographic transition.
Otherwise, high population pressure will continue to make widespread poverty, hunger, vulnerable employment and lack of basic
services a major challenge for most countries of South Asia to achieve.
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